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CRM in Healthcare: Achieving Business Value

Customer relation management is a business strategy designed to optimize profitability, revenue and customer satisfaction. For healthcare organization, there are many unique challenges, especially when attempting to involve customer in more active patient-care management. These challenges include the understanding, sensitivity and criticality of communicating quality information for chronic conditions or terminal illnesses, as well as dealing with increasingly visible and regulated privacy and security requirements, for example the Health Insurance Portability and Accountability Act (HIPAA).

Build the Business Case

A first key step in understanding value from CRM initiatives is the development of a business case. Business cases are designed to assess the cost benefit relationship in terms of ROI, rate of ROI and show whether a proposed investment will bring greater benefit than investment elsewhere—the opportunity costs.

Create a Metrics Framework

Processes and measurement frameworks enable the desired outcomes of CRM initiatives to be measured and evaluated. To more accurately define and measure value from CRM initiatives within a particular business case, healthcare organization must take responsibility for tracking the total cost of ownership, ROI and benefits. As healthcare organizations define their CRM strategies, they should identify the criteria by which the success of the CRM strategy will be measured, (e.g., customer satisfaction, increased revenue and margins, TCO and ROI).

Developing a Business Case for CRM

Millions of dollars are being spent on applications and technologies to support CRM initiatives without organizations knowing whether the projects will decrease costs, improve efficiencies or increase revenue and profitability. Creating a business case before beginning a CRM initiative is a critical first step toward a project success. In order to ensure CRM project success, and achieve real value from CRM initiatives, healthcare organizations should:

  • Clearly define the problem that the business case will resolve

  • Carefully select the participants for the business case analysis

  • Resolve differences and build consensus throughout the project

  • Define and document the rationale for metrics to accurately measure project success

A business case should be performed for each CRM initiative, and should include the following components:

  • A current business case

  • A business case with CRM and a comparison of these business cases, including an ROI analysis

To make certain that a CRM initiative will achieve its goals and objectives, healthcare organizations should approach the business case with the following guidelines in mind:

  • Participants should be comprised of both business and technical people representing the beneficiaries of the initiative. They (participants) should also consist of project sponsors with significant respect and content knowledge

  • Problems should be carefully and clearly defined. Most CRM initiatives are undertaken to address a variety of problems and issues

  • Consider the primary point of view of all key project sponsors

  • Consult with people in the “trenches” to glean any potential pitfalls and obstacles.

  • Create an audit trail for team members as well as the project sponsor to follow to justify the proposed and selected metrics throughout the life of a project. As conditions change, metrics can be modified because of new information.

  • Get “buy-in” from all parties that will be impacted from the CRM initiative. Credible business value for customer relationship management initiatives must be established if a health care organization is to realize the expected results from the effort and expense.

  • A successful business case should be short and succinct. It should contain an executive summary written in language that is comprehensible to the executive that will be reading it. For example, if key decision makers are not technical the business case should not conation excessive technical jargon.

How to Avoid a Healthcare CRM Initiative From Failing

Many healthcare organizations are blindly entering into costly CRM initiatives without an understanding of the difficulties and costs involved in “getting it right”. Healthcare organizations are starting to acknowledge their “first-try” CRM project failures, and doing the economic justifications to ensure that they do not make the same mistakes during their next attempts. Here are a few tips on how to avoid having a healthcare CRM initiative fail.

  • Managing Expectations
    CRM initiatives should start with realistic expectations. The “silver bullet” mentality resides at the over expectation end of the spectrum where the “it will not make a difference” mentality lies on the other end. It makes sense to develop expectations between these two extremes.

  • Change Management
    Failing to effectively manage change can have the greatest negative impact on a CRM initiative. Executive management must definitively hold each functional business unit accountable for delivering their portions of the CRM strategy. Assigning accountability and ownership are powerful motivating factors in managing change.

  • Business Processes
    Applying new applications to poor business processes will only worsen the business effect. Unsuccessful CRM initiatives tend to focus primarily on the IT solutions and pay inadequate attention to the business processes that must be re-engineered and adjusted to accommodate the capabilities of the CRM solutions.

  • Project Work Plan
    The application domains of CRM require unique, individual work plans with specific phases, activities and tasks. Work plans need to be broken down into manageable components, (e.g., project management, business process design, application design, information management, infrastructure, and change management). Each domain plan must be aligned with the overall CRM vision, business process and infrastructure plan which details the execution

CRM: IT Requirements

CRM is an enterprise wide business strategy whose major goals are to maximize revenue, profitability and customer satisfaction. To achieve a successful CRM, managed care organizations must encourage behaviors and implement processes and technologies that support coordinated customer interactions throughout all channels. CRM is a multi-tier, phased strategy which typically begins as separate initiatives, in disparate lines of business whose overall goal is to provide a set of customer-focused processes across all departments and communication channels.

Customer Relationship Management IT Requirements Required to Support CRM:

  • Contact Center – E-business Initiatives
    E-business requires the deployment of many tools and technologies including e-commerce, healthcare vertical portals and e-mail response management systems.

  • Data Sharing and Integration
    As managed care organizations deploy all of the IT requirements for CRM, the must identify sharing and integration as core requirements that will link all components. Data sharing and integration form the centerpiece for CRM and will inevitably determine whether a managed care organization has successful CRM capabilities.

  • Medical Management
    Medical Management requirements vary by market and stakeholder; as a result, applications must be flexible to adjust to business rules and clinical guidelines, and offer capabilities to create customized workflows and integrate with foundation applications.

  • Administrative
    Implementing effective foundation applications is critical to set the stage for successful CRM by providing timely and quality data. MCOs must optimize the performance of customer service processes by ensuring administrative efficiencies and evolving their call center into a contact center.

The 4 Phases of Strategic Evolution for CRM in Healthcare

Four phases form the framework for CRM evolution. They are:

  1. Fragmentation

    In this phase the managed care organization takes a fragmented approach to managing customer relationships, and thusly has many disparate systems and nonintegrated channels of communication. Managed care organizations that remain fragmented will loose (frustrated) customers to the competition

  2. Integration

    This is the phase in which managed care organizations have integrated systems, data sharing and integration technologies. These organizations employ an integrated architecture rather than utilizing a variety of disparate systems with potentially incompatible components. Additionally, these organizations’ architecture supports newer technologies.

  3. Collaboration

    In this third phase, the managed care organization’s technical resources meet each of their client’s unique needs. The organization is able to realize differentiation by enabling its IT structure to optimally support its business strategies. This phase will bring sharing of common customer interaction channels where each channel is tailored to the requirements of each customer.

  4. Transformation

    Achieving transformation requires managed care organizations to effectively re-engineer their cultures, business processes and IT environments. Within this phase, the managed care organizations have transformed business processes to support all customer-facing functions, have integrated customer Web transactions into their operational environments and maintain common platforms. Healthcare organizations that have implemented these forth phase technical capabilities will be able to provide greater value to their customers by servicing them faster and more accurately then their competitors.


Metrics for Measuring CRM ROI

CRM metrics cut across the customer lifecycle and should tied to the enterprise’s processes, to the application of technology and to the organization’s overall strategy. On-going measurement is a major factor in overall success, yet a well articulated and interlinking measurement framework is often missing in CRM initiatives.

Measures for CRM Success

  •  Customer satisfaction
    o Increased customer loyalty demonstrated by repeat purchases over a given time.

  • Customer profitability
    o Increased revenue per customer demonstrated by increasing order sizes at decreasing costs to the healthcare organization

  • Market share
    o Increased penetration within a given market as compared to the healthcare organization’s peers

  • Financial analysis
    o Tangible financial metrics such as TCO, ROI, Net Present Value, Internal Rate of Return and Earnings per Share

  • Increased revenue and margins

CRM Project Decisions Should Include:

  • Scope

  • Functionality increases or decreases

  • Resource deviations from the original project work

  • Assumptions that formed the basis from which the original capital appropriations request was prepared and the initial ROI was projected.

Financial Analysis Tasks

  • Perform financial impact analysis

  • Monitor the financial impacts

  • Manage the project budget on a monthly basis as the project is executed

CRM requires a large investment in technology, labors resources, consulting services and training. Enterprises that are successful with CRM strategies use a financial analyst to develop a CRM metrics framework that ensures that overall CRM goals, metrics and strategy are put into perspective. The healthcare organization’s senior management team takes the responsibility to ensure that the CRM strategy and measurement systems are clearly communicated to the workforce. Processes and measurement frameworks allow the desired outcomes of CRM strategies to be measured and evaluated.

Note: The need for careful preplanning of a CRM project varies depending on the enterprise. Many successful projects are done on the basis of “it seems like the right thing to do”. On the other hand, a detailed plan is useful for healthcare organizations that are waiting for leaders to explore and identify where the benefits exist. A solid plan will better ensure that all of the technological and organizational prerequisites for a successful project are in place.